2014 (1) TMI 1528 - AT - Income Tax

Unexplained investment - Held that - the assessee had been providing short-term advances to various third parties and the amount being returned back by the parties was again being given to others - Relying on the decision in ITO vs Madan Lal Mittal 2006 (5) TMI 305 - ITAT DELHI - The peak credit could be added in such circumstances - The same amount cannot be taxed multiple times - Decided against Revenue. Excessive deduction u/s 80C - Held that - The CIT(A) has not considered the issue in proper manner - There was a fresh evidence before the CIT(A)which has not been confronted to the AO - The issue has been restored for fresh adjudication.

Summary

Issues:
1. Addition of unexplained cash deposit under section 69A of the IT Act, 1961.
2. Acceptance of assessee's contention regarding undisclosed credits.
3. Deletion of excess claim of deduction under section 80-C of IT Act 1961.

Issue 1: Addition of Unexplained Cash Deposit under Section 69A:
The Revenue appealed against the CIT(A)'s order deleting the addition of Rs.18,60,455 made under section 69A of the IT Act, 1961 for unexplained cash deposits. The assessee, engaged in trading wedding cards, explained that the deposits were short-term advances to parties, supported by a cash book and profit/loss account. The AO added Rs.20,45,250 as unexplained deposits and Rs.22,920 as bank interest. The CIT(A) reduced the addition to Rs.1,84,795, considering the peak credit of Rs.2,07,715, and reduced the interest amount. The Tribunal upheld the CIT(A)'s decision, finding no merit in the Revenue's appeal.

Issue 2: Acceptance of Assessee's Contention Regarding Undisclosed Credits:
The Revenue contested the CIT(A)'s decision accepting the assessee's contention that the Chartered Accountant wrongly admitted the credits as undisclosed without consent. The assessee argued that the credits were for short-term advances, citing various case laws. The CIT(A) upheld the assessee's claim, stating that the AO's total addition lacked proper justification and confirmed a reduced addition. The Tribunal dismissed the Revenue's appeal, finding no infirmity in the CIT(A)'s decision.

Issue 3: Deletion of Excess Claim of Deduction under Section 80-C:
The Revenue challenged the CIT(A)'s order allowing a further deduction of Rs.20,000 under section 80-C of the IT Act, 1961. The AO disallowed Rs.21,890 of excess deduction claimed by the assessee. The CIT(A) directed to allow the additional deduction of Rs.20,000. The Tribunal observed that the fresh evidence considered by the CIT(A) was not confronted to the AO and lacked discussion on its nature. Hence, the issue was restored back to the AO for proper examination. The Tribunal allowed the Revenue's appeal on this ground for statistical purposes.

In conclusion, the Tribunal partly allowed the department's appeal, upholding the CIT(A)'s decision on the first two issues but remanding the third issue back to the AO for further examination.